Is There Really a Growing HR/Finance Partnership? New Survey Says Yes

As we move closer to implementing health care reform, here’s a new wrinkle that is a bit surprising.

According to a new survey: “a tighter partnership between corporate finance and human resource executives” is developing as “U.S. companies begin to address the implications of health care reform for their reward programs and talent management strategy.”

The just-released research from Towers Watson, the global professional services giant, is titled Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future. Two paragraphs from the survey are all you need to really understand how the HR-CFO relationship is changing.

Despite a common presumption that finance and HR share little common ground due to fundamental differences in their respective (and sometimes conflicting) areas of focus, data from this survey indicate these functional leaders see eye-to-eye on the most critical issues related to rewards and health care reform.

This is important not only because of the impact of health care reform decisions on cost and talent, but also because the experience of the past few years of corporate belt- tightening, particularly around rewards, have shown companies the risks of making workforce investment decisions in a vacuum.”

Changing roles for finance, HR

The survey was partly about the changing roles of HR and financial executives as organizations struggle to not only implement health care reform, but to manage the uncertain cost implications that most companies are facing.

That’s a big deal moving ahead, but this latest research shows that there are still some misconceptions about who is leading this implementation process, and who will continue to drive it in the months and years to come.

The survey, which was conducted in September 2011 with 300 HR and finance executives in organizations representing a range of industries and ranging in size from 1,000 to 25,000 employees, found the following:

Currently, the majority of HR executives (81 percent) and finance executives (55 percent) agree that setting reward program strategy is largely driven by HR. However, in terms of budgeting for rewards, a greater number of finance respondents (53 percent) indicate they are more involved, compared with 47 percent of HR executives who see themselves in the lead.
Looking ahead a few years, more than one-third (38 percent) of finance executives believe strategy development will be much more of a shared role. That compares with just 24 percent of HR respondents, who mostly believe they will continue to drive the process with minimal involvement from finance executives.
In terms of budgeting for rewards, a greater number of finance respondents (53 percent) indicate they are more involved, compared with 47 percent of HR executives who see themselves in the lead.

“Companies are just beginning to grapple with the complex set of decisions triggered by the new health care reform law — decisions that will have a direct impact on their broader set of employee rewards,” said Randall Abbott, senior Health and Group Benefits consultant at Towers Watson, in a press release about the survey. “The fact that both finance and HR leaders see a role for the other in developing reward strategy and budgets in the future suggests a powerful joining of forces at a time when collaboration is becoming more critical.”

Tensions between finance and HR?

Yes, a collaboration between HR and finance seems to be the way things are heading, but I read the survey results a little differently than the Towers Watson analysts did. Where they saw the potential for greater HR-CFO collaboration, I saw the ongoing conflict between whether HR reports to finance, or, instead reports to the CEO or some other senior executive a la the Jack Welch model.

This tension between HR and finance professionals could be a potential problem in the workplace, but the Towers Watson analysis sees it as not only needed but positive:

At the end of the day, our survey findings show that both HR and finance see themselves as playing a stronger role than the other in setting strategy and budget for their reward program going forward. That tension augurs well, for it is difficult to conceive that an organization can face the demands of reform and other business shifts — or take advantage of the opportunities — without the input of multiple perspectives, particularly those of HR and finance.”

Only time will tell if the HR-finance struggle is a positive thing, but there was one other interesting finding that came out of the Towers Watson survey as it pertains to health care reform.

A majority of finance respondents (two-thirds) anticipate maintaining health care coverage for active employees in some form once the Patient Protection and Affordable Care Act (health care reform) takes full effect — matching the responses of their HR colleagues.
Only 15 percent of finance respondents and 13 percent of HR respondents expected their organizations to eliminate health care coverage and pay required penalties, demonstrating that despite an apparent savings from exiting health plan sponsorship, finance executives understand the deeper implications on total rewards and employee relations.

There is a lot more in Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future about total rewards and other areas where HR and finance come together, and perhaps you’ll read the survey analysis and come up with a different perspective than I did.

In my book, however, the results mirror what has been the main focus in the past — is HR subservient to the finance/CFO operation, or, does it instead take its own counsel as it reports to the CEO or other high-ranking executives? In other words, does HR truly have that “seat at the table” and is an equal with the CFO, or, is it just another line function in the CFO’s sphere of influence?

Good questions all. You should take a look at it yourself and see what you think.